in the united states court of appeals for the tenth … · no. 14-8082 in the united states court...

No. 14-8082

IN THE UNITED STATES COURT OF APPEALSFOR THE TENTH CIRCUIT

AMBER NICOLE LOMPE,

Plaintiff/Appellee,

v.

SUNRIDGE PARTNERS, LLC; AND APARTMENT MANAGEMENT CONSULTANTS, L.L.C,

Defendants/Appellants.

On appeal from the United States District Court for the District of Wyoming,No. 12 CV 088 J, Hon. Alan B. Johnson

BRIEF OF AMICUS CURIAE THE CHAMBER OF COMMERCEOF THE UNITED STATES OF AMERICA

IN SUPPORT OF DEFENDANTS/APPELLANTS

Kate Comerford ToddWarren PostmanU.S. CHAMBER LITIGATION CENTER

1615 H Street, N.W.Washington, D.C. 20062(202) 463-5337

Evan M. TagerCarl J. SummersMAYER BROWN LLP1999 K Street, N.W.Washington, DC 20006(202) 263-3000

Attorneys for Amicus CuriaeThe Chamber of Commerce of the United States of America

Appellate Case: 14-8082 Document: 01019416718 Date Filed: 04/16/2015 Page: 1

i

CORPORATE DISCLOSURE STATEMENT

The Chamber of Commerce of the United States of America is a nonprofit

corporation organized under the laws of the District of Columbia. It has no parent

company and has issued no stock.


TABLE OF CONTENTS

Page

ii

CORPORATE DISCLOSURE STATEMENT .........................................................i

TABLE OF AUTHORITIES .................................................................................. iii

INTEREST OF THE AMICUS CURIAE ................................................................1

INTRODUCTION AND SUMMARY OF ARGUMENT.......................................2

ARGUMENT ............................................................................................................3

I. Under The Due Process Clause, Reviewing Courts Must Take AnActive Role In Ensuring That Punitive Damages Are Not Excessive ...........3

A. The district court erred by taking a deferential, hands-offapproach to the question of excessiveness ...........................................4

B. The district court erred by deferring to phantom factual findingsthat the jury did not make.....................................................................8

II. The District Court Committed At Least Two Errors In CalculatingThe Punitive/Compensatory Ratio................................................................15

A. The district court erroneously failed to deduct from thecompensatory damages the amount attributable to plaintiff’snegligence...........................................................................................15

B. The district court erred in comparing each punitive award to thefull amount of compensatory damages ..............................................15

III. The Ratio Of Compensatory To Punitive Damages Should NotExceed 1:1 When, As Here, The Compensatory Damages AreSubstantial.....................................................................................................17

CONCLUSION.......................................................................................................24


iii

TABLE OF AUTHORITIES

Page(s)

Cases

Advocat, Inc. v. Sauer,111 S.W.3d 346 (Ark. 2003) ..............................................................................16

Aken v. Plains Elec. Generation & Transmission Co-op,49 P.3d 662 (N.M. 2002) ....................................................................................14

Alla v. Verkay,979 F. Supp. 2d 349 (E.D.N.Y. 2013) ................................................................16

Alley v. Gubser Dev. Co.,785 F.2d 849 (10th Cir. 1986) ..............................................................................7

Bach v. First Union Nat’l Bank,486 F.3d 150 (6th Cir. 2007) ..............................................................................20

Bains LLC v. ARCO Prods. Co.,405 F.3d 764 (9th Cir. 2005) ..............................................................................17

BMW of N. Am., Inc. v. Gore,517 U.S.559 (1996)......................................................................................passim

Boeken v. Philip Morris Inc.,26 Cal. Rptr. 3d 638 (Ct. App. 2005) .................................................................21

Boerner v. Brown & Williamson Tobacco Co.,394 F.3d 594 (8th Cir. 2005) ..............................................................................20

Bridgeport Music, Inc. v. Justin Combs Publ’g,507 F.3d 470 (6th Cir. 2007) ..............................................................................20

Clark v. Chrysler Corp.,436 F.3d 594 (6th Cir. 2006) ..............................................................................15

Cooper Indus. v. Leatherman Tool Grp., Inc.,532 U.S. 424 (2001)....................................................................................4, 9, 12


TABLE OF AUTHORITIES(continued)

Page(s)

iv

DiSorbo v. Hoy,343 F.3d 172 (2d Cir. 2003) ...............................................................................20

Exxon Shipping Co. v. Baker,554 U.S. 471 (2008)..................................................................................3, 18, 19

Farm Bureau Life Ins. Co. v. Am. Nat’l Ins. Co.,2009 WL 361267 (D. Utah Feb. 11, 2009), aff’d in part, vacated inpart, rev’d in part, 408 F. App’x 162 (10th Cir. 2011)......................................16

Ford v. GACS, Inc.,265 F.3d 670 (8th Cir. 2001) ................................................................................7

Goddard v. Farmers Ins. Co.,179 P.3d 645 (Or. 2008) (en banc) .....................................................................15

Grabinski v. Blue Springs Ford Sales, Inc.,203 F.3d 1024 (8th Cir. 2000) ............................................................................16

Jones v. United Parcel Serv., Inc.,674 F.3d 1187 (10th Cir. 2012) ..........................................................................19

Jurinko v. Medical Protective Co.,305 F. App’x 13 (3d Cir. 2008) ..........................................................................20

Kimble v. Land Concepts, Inc.,845 N.W.2d 395 (Wis. 2014), cert. denied, 135 S. Ct. 359 (2014)......................5

M.D. Mark, Inc. v. Kerr-McGee Corp.,565 F.3d 753 (10th Cir. 2009) ..............................................................................6

Memphis Cmty. Sch. Dist. v. Stachura477 U.S. 299 (1986)............................................................................................22

Mendez-Matos v. Municipality of Guaynabo,557 F.3d 36 (1st Cir. 2009).................................................................................20

Morgan v. New York Life Ins. Co.,559 F.3d 425 (6th Cir. 2009) ..............................................................................19


TABLE OF AUTHORITIES(continued)

Page(s)

v

Pac. Mut. Life Ins. Co. v. Haslip,499 U.S. 1 (1991)..............................................................................................3, 5

Payne v. Jones,711 F.3d 85 (2d Cir. 2013) ..........................................................................passim

Rufo v. Simpson,103 Cal. Rptr. 2d 492 (Ct. App. 2001) ...............................................................10

Satcher v. Honda Motor Co.,52 F.3d 1311 (5th Cir. 1995) ................................................................................7

Simon v. San Paolo U.S. Holding Co.,113 P.3d 63 (Cal. 2005) ..........................................................................14, 17, 22

State Farm Mut. Auto. Ins. Co. v. Campbell,538 U.S. 408 (2003).....................................................................................passim

Turley v. ISG Lackawanna, Inc.,774 F.3d 140 (2d Cir. 2014) ...............................................................................22

Walker v. Farmers Ins. Exch.,63 Cal. Rptr. 3d 507 (Ct. App. 2007) .................................................................22

Williams v. ConAgra Poultry Co.,378 F.3d 790 (8th Cir. 2004) ..............................................................................20

Zakre v. Norddeutsche Landesbank Girozentrale,344 F. App’x 628 (2d Cir. 2009) ........................................................................20

Other Authorities

Cass R. Sunstein et al., PUNITIVE DAMAGES: HOW JURIES DECIDE

(2002)....................................................................................................................5

David G. Owen, Problems in Assessing Punitive Damages AgainstManufacturers of Defective Products, 49 U. CHI. L. REV. 1 (1982).....................7

Restatement (Second) of Torts § 908, cmt. c (1979)...............................................22


1

INTEREST OF THE AMICUS CURIAE1

The Chamber of Commerce of the United States of America (the

“Chamber”) is the world’s largest business federation. It represents 300,000 direct

members and indirectly represents the interests of more than three million

companies and professional organizations of every size, in every industry sector,

and from every region of the country.

One of the Chamber’s most important responsibilities is to represent the

interests of its members in matters before the courts, Congress, and the Executive

Branch. To that end, the Chamber regularly files amicus curiae briefs in cases that

raise issues of vital concern to the nation’s business community.

Few issues are of more concern to American business than those pertaining

to the fair administration of punitive damages. The Chamber regularly files amicus

briefs in significant punitive damages cases, including every case in which the

United States Supreme Court has addressed such issues during the past two

decades.

1 All parties have consented to the filing of this brief. No party or counsel for aparty in the pending appeal authored the proposed amicus brief in whole or in partor made a monetary contribution intended to fund the preparation or submission ofthe brief. No person or entity made a monetary contribution intended to fund thepreparation or submission of this brief, other than the amicus curiae, its members,and its counsel.


2

INTRODUCTION AND SUMMARY OF ARGUMENT

Applying an exceptionally deferential standard, the district court refused to

disturb a pair of punitive awards that are shocking in their total size, the financial

devastation they threaten for the two defendants, and their relationship to the

already substantial compensatory award. The district court’s ruling implicates a

number of important issues related to the amount of punitive damages.

First, the hands-off approach employed by the district court in reviewing the

amount of punitive damages is diametrically opposed to the exacting review

mandated under the Due Process Clause. Relatedly, when assessing the

reprehensibility of the defendants’ conduct, the district court inappropriately

deferred to phantom factual findings that the jurors never made. With respect to the

Supreme Court’s ratio guidepost, the district court both failed to reduce the

compensatory damages to account for the plaintiff’s negligence and improperly

compared the punitive award imposed against each defendant with the entire

compensatory award, badly skewing the ratio calculation. Finally, and regardless,

the ratios accepted by the district court are out of line with modern case law, which

strongly suggests that the constitutional maximum is 1:1 or lower when, as here,

the compensatory award is substantial and the conduct at issue is not especially

heinous.


3

ARGUMENT

I. Under The Due Process Clause, Reviewing Courts Must Take An ActiveRole In Ensuring That Punitive Damages Are Not Excessive.

The fundamental question underlying constitutional review of punitive

awards for excessiveness is “whether [the] particular award is greater than

reasonably necessary to punish and deter.” Pac. Mut. Life Ins. Co. v. Haslip, 499

U.S. 1, 22 (1991). When “a more modest punishment for [the defendant’s]

reprehensible conduct could have satisfied the State’s legitimate objectives,” then a

reviewing court should reduce the award to that amount and “go[] no further.”

State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 419-20 (2003); see also

BMW of N. Am., Inc. v. Gore, 517 U.S.559, 568, 584 (1996) (“The sanction

imposed … cannot be justified … without considering whether less drastic

remedies could be expected to achieve [punishment and deterrence].”); cf. Exxon

Shipping Co. v. Baker, 554 U.S. 471, 513 (2008) (recognizing “the need to protect

against the possibility … of [punitive] awards that are unpredictable and

unnecessary, either for deterrence or for measured retribution”).

To aid courts in determining whether a punitive award exceeds the amount

necessary to punish and deter, the Supreme Court has identified three

“guideposts”: (1) the degree of reprehensibility of the defendant’s conduct; (2) the

ratio of punitive to compensatory damages; and (3) the civil penalties applicable to

comparable conduct. BMW, 517 U.S. at 574-75. Although courts reviewing a


4

punitive award must consider each of these guideposts, the guideposts have no

intrinsic constitutional significance. Instead, they are useful because they create a

framework that helps courts rationally and consistently answer the relevant

constitutional question: Whether the State’s legitimate interests in punishment and

deterrence can be accomplished by a lower award.

A. The district court erred by taking a deferential, hands-offapproach to the question of excessiveness.

Under the Due Process Clause, reviewing courts must take an active role in

policing punitive awards for excessiveness. As the Supreme Court has observed,

“the level of punitive damages is not really a ‘fact’ ‘tried’ by the jury” but instead

“is an expression of [the jury’s] moral condemnation.” Cooper Indus. v.

Leatherman Tool Grp., Inc., 532 U.S. 424, 432, 437 (2001). That is why review of

punitive awards using the Supreme Court’s guideposts is de novo and must be

“[e]xacting” to “ensure[] that an award of punitive damages is based upon an

application of law, rather than a decisionmaker’s caprice.” State Farm, 538 U.S. at

418 (internal quotation marks omitted).

When a criminal defendant has been found guilty beyond a reasonable

doubt, following a trial safeguarded by numerous Due Process protections that are

not available to a civil defendant, the range of appropriate punishments generally is

cabined by statute. In contrast, civil juries tasked with setting punitive damages

have “nothing to rely on other than the instincts of the jurors and random, often


5

inaccurate, bits of information derived from press accounts or word of mouth in the

community about how [punitive damages] have been valued in other cases.” Payne

v. Jones, 711 F.3d 85, 93 (2d Cir. 2013). They have “no objective standards to

guide them, and understandably outraged by the bad conduct of the defendant,

jurors may be impelled to set punitive damages at any amount.” Id. at 93-94. Thus,

studies have shown that “salient numbers, such as a plaintiff’s request for a

specific dollar amount, have a dramatic impact on [mock] jurors’ awards” of

punitive damages, whether or not those numbers have a legitimate relationship to

the appropriate punishment for the defendant’s conduct. Cass R. Sunstein et al.,

PUNITIVE DAMAGES: HOW JURIES DECIDE 240 (2002). Moreover, jurors may be

influenced by extraneous factors such as “[r]egional biases against particular

companies.” Payne, 711 F.3d at 94. It is thus critically important that courts

diligently carry out their role under the Due Process Clause to ensure that punitive

damages imposed by a civil jury are not greater than “reasonably necessary to

punish and deter.” Haslip, 499 U.S. at 22; see also Kimble v. Land Concepts, Inc.,

845 N.W.2d 395, 407 (Wis. 2014) (“[a] punitive damages award is excessive, and

therefore violates due process, if it is more than necessary to serve the purposes of

punitive damages”) (internal quotation marks omitted), cert. denied, 135 S. Ct. 359

(2014).


6

Here, the district court fundamentally misunderstood its role when reviewing

the quasi-criminal punitive awards imposed by the jury. Instead of engaging in an

exacting review to determine whether Wyoming’s interest in punishment and

deterrence could be accomplished by a lesser sanction, the court relied on cases

emphasizing the great deference reviewing courts normally give to an award of

compensatory damages. See slip op. 24-25. For example, the district court said that

a jury’s award of damages “is inviolate unless we find it ‘so excessive that it

shocks the judicial conscience and raises an irresistible inference that passion,

prejudice, corruption, or other improper cause invaded the trial.’” App. 310-11

(quoting M.D. Mark, Inc. v. Kerr-McGee Corp., 565 F.3d 753, 766 (10th Cir.

2009) (describing standard of review for compensatory damages)). And the court

declined to reduce the punitive awards—even while accepting that they are

“surprising” and “far greater than that usually seen in this district”—because “the

[c]ourt hesitates to interfere with the jury’s determination as to punitive damages.”

App. 313-14.

That reluctant, deferential, and hands-off approach is diametrically opposed

to the exacting review required by Supreme Court precedent and demonstrated by

recent federal appellate decisions. For example, in Payne, an excessive-force case

against a police officer, the Second Circuit recently ordered a remittitur of the

punitive damages from $300,000 to $100,000. While recognizing that, “there is no


7

doubt that [the officer’s] conduct was reprehensible,” the Second Circuit noted that

“there were also mitigating factors to be counted in [the officer’s] favor in making

the degree-of-reprehensibility analysis.” 711 F.3d at 101. Accordingly, taking into

account both its conclusion that “the degree of reprehensibility was not all that

high” (id.) and its determination that the $60,000 compensatory award was

“substantial” (id. at 103), the court held that the conduct “was not so egregious as

to justify punitive damages of $300,000” and ordered a remittitur to $100,000 (id.

at 106).

Here, there can be no question that the punitive awards approved by the

district court fail the fundamental test whether a lesser sanction could achieve

Wyoming’s interest in punishment and deterrence. The conduct being punished

here is repairing or replacing furnaces as problems arise—which the evidence

showed is the standard industry practice—rather than engaging in preventive

maintenance. If this is punishable conduct at all, it is far from the most egregious

seen in the judicial system.2 Yet if allowed to stand the punitive awards in this case

2 We note that many courts—including this one—and commentators haveobserved that compliance with industry custom is inconsistent with the state ofmind necessary for imposition of punitive damages. See, e.g., Alley v. Gubser Dev.Co., 785 F.2d 849, 856 (10th Cir. 1986) (reversing denial of directed verdict onpunitive damages where defendants’ conduct was consistent with industrypractice); Ford v. GACS, Inc., 265 F.3d 670, 678 (8th Cir. 2001) (similar); Satcherv. Honda Motor Co., 52 F.3d 1311, 1316-17 (5th Cir. 1995) (similar); seegenerally David G. Owen, Problems in Assessing Punitive Damages AgainstManufacturers of Defective Products, 49 U. CHI. L. REV. 1, 40-41 (1982) (“Rarely


8

will wreak financial havoc on the defendants, stripping them of years of profits that

have long since been distributed. And, as the district court acknowledged, the sheer

size of these awards is far out of line with that of other punitive awards from

Wyoming courts. App. 313-14. Nothing close to this draconian result is necessary

to accomplish whatever interest Wyoming may have in punishing this conduct and

encouraging landlords to adopt preventive maintenance programs going forward.

B. The district court erred by deferring to phantom factual findingsthat the jury did not make.

The district court stated that “it is not the [c]ourt’s province to second-guess

the jury’s findings” and “[i]t is unquestioned that the jury viewed the defendants’

conduct as egregious, warranting a greater award of punitive damages.” App. 313-

14. But the jury made no such express finding about egregiousness of the

defendants’ conduct. This kind of deference to “implied” findings confuses the

jury’s liability determination with its judgment of an appropriate amount of

punishment. A liability verdict necessarily constitutes a factual finding that each

indispensable element of the cause of action has been established. In contrast, the

jury’s function in setting the amount of punitive damages does not typically

involve determining whether any particular fact has been proven. The jury

generally is not instructed that it must find specific facts to impose a particular

will an entire industry act with flagrant impropriety against the health and safety ofthe consuming public, and running with the pack in general should shield amanufacturer from later punishment for conforming to the norm.”).


9

amount of punitive damages and rarely is asked to return a special verdict

answering specific factual questions that would bear on the degree of

reprehensibility of the defendant’s conduct or other issues relevant to determining

the amount of punitive damages. Rather, the jury essentially is asked to make an

impressionistic judgment about the amount of punishment to exact. The resulting

verdict is the legal equivalent of an ink blot, subject to any number of possible

interpretations. See, e.g., Cooper Indus., 532 U.S. at 432, 437 (“the level of

punitive damages is not really a ‘fact’ ‘tried’ by the jury” but “is an expression of

[the jury’s] moral condemnation”).

It follows that the procedure for reviewing the amount of punitive damages

must be substantially different from the procedure courts use when a party

challenges the liability determination based on insufficiency of the evidence.

Because it is not possible to tell what facts (if any) the jury found in setting an

amount of punitive damages or what relative weight it gave to any facts that may

have been found, application of a sufficiency-of-the-evidence standard (as the

district court did here) would result in deference being given to what in reality are

phantom factual determinations. This approach will consistently result in “false

positive” determinations of high reprehensibility whenever the jury has returned a

large award and thus interferes with meaningful review of awards for

excessiveness.


10

Concern about the misleading effect of improper deference to phantom

factual findings is more than hypothetical. In most cases in which punitive

damages are sought against a corporation, the plaintiff’s counsel argues that the

punitive damages must be significant in relation to the defendant’s net worth (or

some similar measure of wealth) in order to accomplish the deterrent function. This

case is no exception. Lompe’s entire presentation during the punitive damages

phase consisted of testimony from an economist who opined about the defendants’

finances. See App. 1873-1917. And during the punitive phase arguments, Lompe’s

counsel unabashedly and repeatedly urged the jury to peg its punishment to the

defendants’ financial status, telling the jury that a lesser award would be

insufficient to motivate “wealthy” corporate defendants to change their practices.

See, e.g., App. 1869-70, 1945-46.

For this and other reasons, there is no basis for the district court’s

assumption that, in imposing punitive damages totaling $25.5 million, the jury

regarded the defendants’ conduct to be especially reprehensible, much less that it

found defendants to have acted with the degree of malice that generally would be

expected to warrant a punishment of this magnitude. Cf. Rufo v. Simpson, 103 Cal.

Rptr. 2d 492, 524-25 (Ct. App. 2001) (affirming punitive awards of $25 million for

brutal murders of defendant’s ex-wife and a bystander). Indeed, empirical research

suggests that the verdict was more likely the result of the skewed financial frame


11

of reference offered by plaintiff’s counsel than of a considered finding that the

defendants’ conduct was exceptionally reprehensible. See generally Sunstein,

supra, at 62 (explaining that empirical research demonstrates that “[t]he dollar

amounts that are requested by plaintiffs in their closing arguments to a jury have a

dramatic effect on the size of the punitive damages award: the higher the request,

the higher the awards”).

Each of the Supreme Court’s last three punitive damages due process

decisions either implicitly or explicitly recognizes the distinction between liability

determinations and the impressionistic task of setting an amount of punitive

damages, and each therefore undercuts the notion that courts conducting the

constitutionally required excessiveness review should defer to “implicit” findings

that there is no basis for concluding the jury actually made.

In BMW, for example, the plaintiff’s theory was that “BMW was palming

off damaged, inferior-quality goods as new and undamaged, so that BMW could

pocket 10 percent more than the true value of each car.” Brief of Respondent at 17,

BMW of N. Am., Inc. v. Gore, 517 U.S. 559 (1996) (No. 94-896), 1995 WL

330613. Had the Supreme Court believed itself obliged to apply a sufficiency-of-

the-evidence standard, it surely would have accepted this inference as being one

that the jury reasonably could have reached. Instead, after reviewing the record for

itself, the Court concluded that the case implicated “none of the aggravating factors


http://www.westlaw.com/Find/Default.wl?rs=dfa1.0&vr=2.0&DB=0000999&FindType=Y&SerialNum=1995121605

http://www.westlaw.com/Find/Default.wl?rs=dfa1.0&vr=2.0&DB=0000999&FindType=Y&SerialNum=1995121605

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associated with particularly reprehensible conduct” and expressly found that

“[t]here is no evidence that BMW acted in bad faith when it sought to establish the

appropriate line between presumptively minor damage and damage requiring

disclosure to purchasers.” BMW, 517 U.S. at 576, 579. The Court emphasized that

the jury’s finding of the conduct necessary for punitive liability was entirely

irrelevant to the excessiveness analysis, stating:

We accept, of course, the jury’s finding that BMW suppressed a

material fact which Alabama law obligated it to communicate to

prospective purchasers of repainted cars in that State. … That conduct

is sufficiently reprehensible to give rise to tort liability, and even a

modest award of exemplary damages [, however,] does not establish

the high degree of culpability that warrants a substantial punitive

damages award.

Id. at 579-80; see also id. at 585 (“[W]e of course accept the Alabama courts’ view

that the state interests in protecting its citizens from deceptive trade practices

justifies a sanction in addition to the recovery of compensatory damages. We

cannot, however, accept the conclusion of the Alabama Supreme Court that

BMW’s conduct was sufficiently egregious to justify a punitive sanction that is

tantamount to a severe criminal penalty.”).

In Cooper Industries, the Supreme Court observed that “the level of punitive

damages is not really a ‘fact’ ‘tried’ by the jury,” but instead “is an expression of

[the jury’s] moral condemnation.” 532 U.S. at432, 437 (internal quotation marks


13

omitted). Accordingly, review for excessiveness is de novo unless the jury has

made “specific findings of fact.” Id. at 439 n.12 (emphasis added). Indeed,

exercising that de novo review, the Court expressly rejected the plaintiff’s assertion

that, for purposes of the second guidepost, the potential harm was $3 million. Id. at

441-42.

Then, in State Farm, after reiterating the importance of “[e]xacting appellate

review” (538 U.S. at 418), the Court made clear from its own actions that this

critical constitutional requirement cannot be satisfied by application of the

extremely deferential sufficiency-of-the-evidence standard. Thus, although one of

the dissenting Justices applied such a standard, arguing that “[e]vidence the jury

could credit demonstrated that the PP & R program regularly and adversely

affected Utah residents” (id. at 432 (Ginsburg, J., dissenting)), the six-Justice

majority gave no deference to findings that the jury did not necessarily make,

instead concluding from its own review of the record that there was “scant

evidence of repeated misconduct of the sort that injured [the plaintiffs]” (id. at

423).

The upshot is that where, as here, the jury has not been asked to respond to

special interrogatories bearing on the degree of reprehensibility of the defendant’s

conduct and other considerations relevant to setting the amount of punitive

damages, reviewing courts may not simply assume that every relevant fact was


14

resolved against the defendant and indulge every inference urged by the plaintiff.

Instead, a reviewing court must independently resolve the disputed factual issues

bearing on the amount of punitive damages before applying the three BMW

guideposts. As the Supreme Court of California has noted, while “findings of

historical fact made in the trial court are still entitled to the ordinary measure of

appellate deference,” reviewing courts may not “presume[e] simply from the size

of the punitive damages award” that the jury made any particular finding of fact,

because “to infer [such a finding] from the size of the award would be inconsistent

with de novo review, for the award’s size would thereby indirectly justify itself.”

Simon v. San Paolo U.S. Holding Co., 113 P.3d 63, 70 (Cal. 2005); see also, e.g.,

Aken v. Plains Elec. Generation & Transmission Co-op, 49 P.3d 662, 668 (N.M.

2002).

Here, for example, when reviewing the size of the punitive award, there is

no warrant to assume that the jury believed that the defendants engaged in any of

the post-accident “cover up” alleged by plaintiffs’ counsel. Rather, like the U.S.

Supreme Court in BMW, Cooper Industries, and State Farm (and the Supreme

Court of California in Simon) this Court should independently review the record

for purposes of resolving any disputed issues of fact that bear on the degree of

reprehensibility of the defendants’ conduct and any other considerations that are

pertinent to the excessiveness inquiry. After making the necessary factual


15

determinations, the three guideposts should be applied to those facts de novo. In

this way, the Court can provide the lower courts of this Circuit with needed

guidance about the proper application of the BMW/Cooper Industries/State Farm

framework.

II. The District Court Committed At Least Two Errors In Calculating ThePunitive/Compensatory Ratio.

A. The district court erroneously failed to deduct from thecompensatory damages the amount attributable to plaintiff’snegligence.

When calculating the ratio of punitive to compensatory damages, the district

court used the entire amount of compensatory damages found by the jury—

$3,000,000—(App. 288, 312) even though the jury assigned plaintiff 10% of the

fault for her own injuries (id. at 287-88). As other courts have held when

confronting this issue, “a ratio based on the full compensatory award would

improperly punish [defendants] for conduct the jury determined to be the fault of

the plaintiff.” Clark v. Chrysler Corp., 436 F.3d 594, 606 n.16 (6th Cir. 2006); see

also, e.g., Goddard v. Farmers Ins. Co., 179 P.3d 645, 666 (Or. 2008) (en banc).

Accordingly, the proper amount of compensatory damages for purposes of the ratio

guidepost here is $2,700,000.

B. The district court erred in comparing each punitive award to thefull amount of compensatory damages.

The district court committed an even more consequential error by comparing

the punitive damages against each defendant to the total amount of compensatory


16

damages apportioned between the plaintiff and both defendants. As the Eighth

Circuit has explained in rejecting this very methodology, however, to compare

each defendant’s punitive damages to the total amount of compensatory damages

“assumes an impossibility … because it posits that each defendant will ultimately

pay the full compensatory damages award.” Grabinski v. Blue Springs Ford Sales,

Inc., 203 F.3d 1024, 1026 (8th Cir. 2000); see also, e.g., Alla v. Verkay, 979 F.

Supp. 2d 349, 374 (E.D.N.Y. 2013) (following Grabinski). Instead, the appropriate

methodology in a case involving punitive awards against unrelated defendants is to

first apportion the compensatory damages between the defendants pursuant to the

jury’s assessment of relative fault and then apply the Supreme Court’s guideposts

separately for each defendant. Here, for example, Sunridge was found to be 25% at

fault and the ratio for the punitive award against Sunridge would thus be 4:1

($3,000,000 to $750,000), while the ratio for AMC would be 11.5:1 ($22,500,000

to $1,950,000).3 This procedure is necessary to preserve the rationale of the ratio

3 Although the question is not presented here, when a jury returns separatepunitive awards against multiple members of the same corporate family, the bestpractice is to compare the total amount of punitive damages to the total amount ofcompensatory damages, since whatever punitive damages are left standing afterreview will ultimately be paid by the corporate parent. See, e.g., Farm Bureau LifeIns. Co. v. Am. Nat’l Ins. Co., 2009 WL 361267, at *9-10 (D. Utah Feb. 11, 2009)(in case in which punitive damages were imposed separately against threemembers of same corporate family, court calculated ratio by comparing theaggregate amount of punitive damages to the compensatory award for which all thedefendants were held jointly and severally liable), aff’d in part, vacated in part,rev’d in part, 408 F. App’x 162 (10th Cir. 2011); Advocat, Inc. v. Sauer, 111


17

guidepost—establishing a stable and predictable relationship between the punitive

award and the harm caused by the defendant.

III. The Ratio Of Compensatory To Punitive Damages Should Not Exceed1:1 When, As Here, The Compensatory Damages Are Substantial.

In State Farm, the Supreme Court “addressed [the ratio] guidepost with

markedly greater emphasis and more constraining language” than it had in

previous cases, “tighten[ing] the noose” that it previously had thrown around the

problem of excessive punitive awards. Simon, 113 P.3d at 76. Specifically, State

Farm reiterated the Supreme Court’s prior statement that a punitive award of four

times compensatory damages is generally “close to the line of constitutional

impropriety” and indicated that, though “not binding,” the 700-year-long history of

double, treble, and quadruple damages remedies (i.e., ratios of 1:1 to 3:1) is

“instructive.” 538 U.S. at 425. More to the point here, State Farm also

“emphasizes and supplements” BMW “by holding that ‘[w]hen compensatory

damages are substantial, then a lesser ratio, perhaps only equal to compensatory

damages, can reach the outermost limit of the due process guarantee.’” Bains LLC

v. ARCO Prods. Co., 405 F.3d 764, 776 (9th Cir. 2005) (quoting State Farm, 538

U.S. at 425).

S.W.3d 346, 360-62 (Ark. 2003) (dividing aggregate punitive awards against threerelated companies by total compensatory award to calculate ratio).


18

Although it is not a due-process case, Exxon Shipping reiterates State

Farm’s statement that “when compensatory damages are substantial, then a lesser

ratio, perhaps only equal to compensatory damages, can reach the outermost limit

of the due process guarantee.” 554 U.S. at 501 (internal quotation marks and

alterations omitted); see also id. at 514 & n.28 (quoting the same language and

stating that “[i]n this case, then, the constitutional outer limit may well be 1:1”).4

To be sure, these principles do not establish a rigid mathematical formula for

calculating punitive damages, but instead create a rough framework under which

the maximum permissible ratio depends principally on two variables: the degree of

reprehensibility of the conduct and the magnitude of the harm caused by the

conduct (here, as in most cases, the amount of the compensatory damages). The

maximum permissible ratio is directly related to the degree of reprehensibility and

inversely related to the harm caused. In other words, for any particular degree of

reprehensibility, as the compensatory damages increase, the maximum permissible

ratio decreases. And for any particular amount of compensatory damages, the

lower on the reprehensibility spectrum the conduct falls, the lower the

constitutionally permissible ratio. In Payne, for example, the Second Circuit

indicated that a 10:1 ratio might be permissible had the conduct before it caused

4 The Supreme Court’s concern in Exxon Shipping—that the current punitivedamages system is not producing “consistent results in cases with similar facts”(554 U.S. at 500)—applies with even greater force in the context of due process.


19

only $10,000 in compensable harm, while a 1:1 ratio would be “very high” if the

compensatory damages had been $300,000. 711 F.3d at 103. The court concluded

that, “given the substantial amount of the compensatory award”—$60,000—a 5:1

ratio “appears high” (id.); ultimately, it ordered a remittitur to $100,000,

representing a ratio of 1.67:1 (id. at 106).

Thus, when State Farm and Exxon Shipping stated that a ratio of 1:1 may be

the constitutional limit when compensatory damages are substantial, they were

describing an outer bound for all such punitive awards. It follows that when

compensatory damages are substantial and reprehensibility is not high, an even

lower ratio may be required. That is the only way to maintain proportionality

between reprehensibility and ratio—ensuring that more egregious conduct is

punished more severely. Here, for example, where the compensatory damages are

very substantial but the conduct is far from the high end of the spectrum of

reprehensible conduct, a ratio below 1:1 likely is required.

Since State Farm, many courts—including this one—have found that, when

compensatory damages are in the hundreds of thousands or millions of dollars, a

ratio of 1:1 or lower marks the outer limit of due process.5 We have surveyed all

5 Illustrative decisions of the federal courts of appeals include Jones v. UnitedParcel Serv., Inc., 674 F.3d 1187, 1206-08 (10th Cir. 2012) (reducing $2,000,000punitive award to amount equal to the $630,307 compensatory award); Morgan v.New York Life Ins. Co., 559 F.3d 425, 441-43 (6th Cir. 2009) (vacating$10,000,000 punitive award that was 1.67 times the compensatory award and


20

appellate decisions from the past decade involving punitive damages in which the

final compensatory award was $2.7 million or greater. In none of those cases has a

double-digit ratio of punitive to compensatory damages survived review. See

Exhibit 1.6 Among the 46 cases—many of which involve significantly more

remanding with instructions to enter remittitur in an amount not more thancompensatory damages); Mendez-Matos v. Municipality of Guaynabo, 557 F.3d36, 56 (1st Cir. 2009) (reducing $350,000 punitive award to $35,000, whichequaled the compensatory damages); Zakre v. Norddeutsche LandesbankGirozentrale, 344 F. App’x 628, 631 (2d Cir. 2009) (affirming reduction ofpunitive award from $2.5 million to $600,000 where compensatory damages wereapproximately $1.5 million); Jurinko v. Medical Protective Co., 305 F. App’x 13,27-32 (3d Cir. 2008) (reducing 3.13:1 ratio to 1:1 where compensatory damagesand attorneys’ fees totaled approximately $2 million); Bridgeport Music, Inc. v.Justin Combs Publ’g, 507 F.3d 470, 487 (6th Cir. 2007) (reversing punitive awardthat was 9.5 times the compensatory damages and holding that “[i]n this casewhere only one of the reprehensibility factors is present, a ratio in the range of 1:1to 2:1 is all that due process will allow”); Bach v. First Union Nat’l Bank, 486 F.3d150, 152-53, 157 (6th Cir. 2007) (ordering remittitur of $2,628,600 punitive awardto no more than $400,000, where compensatory damages were $400,000); Boernerv. Brown & Williamson Tobacco Co., 394 F.3d 594, 603 (8th Cir. 2005) (reducingratio from 3.7:1 to 1.2:1 where compensatory damages were about $4,000,000);Williams v. ConAgra Poultry Co., 378 F.3d 790, 798-99 (8th Cir. 2004) (reducing$6,063,750 punitive award for harassment to $600,000, an amount equal to thecompensatory damages); DiSorbo v. Hoy, 343 F.3d 172, 176-77, 189 (2d Cir.2003) (ordering remittitur of compensatory award to $250,000 and remittitur ofpunitive damages from $1,275,000 to $75,000). There are many additionaldecisions of federal district courts and state appellate courts reducing punitiveawards to the amount of the compensatory damages or below.6 We have excluded from this survey six cases brought against the IslamicRepublic of Iran for sponsoring acts of terrorism that resulted in the violent deathsof and devastating injuries to hundreds of innocent victims. Those cases are sounique as to be useless for determining an appropriate ratio of punitive tocompensatory damages in a case in which the defendant undeniably had nointention of causing injury.


21

reprehensible conduct than is present here—the median ratio is 0.95:1 and the

mean ratio is 1.33:1. The highest ratio is 9:1 (on compensatory damages of $5.5

million) in a case alleging that a tobacco company systematically deceived millions

of smokers—including youths at whom the representations were targeted—about

the health effects of smoking, resulting in the plaintiff’s development of lung

cancer that required “extremely painful surgery to remove the upper part of a lung”

and ultimately spread to his brain and lymph nodes. Boeken v. Philip Morris Inc.,

26 Cal. Rptr. 3d 638, 657-58, 687 (Ct. App. 2005) (reducing $3 billion punitive

award to $50 million). This survey of cases confirms that the district court’s

deferential ruling, which allowed a ratio of 9:1 to stand (using the aggregate

punitive damages), is out of line with modern decisions applying the Supreme

Court’s due process guideposts. This is one of those cases in which the

compensatory damages are substantial, the conduct is not exceptionally egregious,

and the outside limit for the ratio accordingly should be 1:1 or lower.

Moreover, a downward adjustment of the ratio is warranted in cases, like

this one, in which a significant portion of the compensatory award is for non-

economic damages such as emotional distress, which already have a punitive

aspect. As a general matter, the Supreme Court repeatedly has recognized that

compensatory damages have a deterrent effect in their own right, and, accordingly,

has emphasized that “punitive damages should only be awarded if the defendant’s


22

culpability, after having paid compensatory damages, is so reprehensible as to

warrant the imposition of further sanctions to achieve punishment or deterrence.”

State Farm, 538 U.S. at 419; see also Memphis Cmty. Sch. Dist. v. Stachura 477

U.S. 299, 307 (1986) (“[d]eterrence … operates through the mechanism of

damages that are compensatory”). The punitive aspect of compensatory damages is

most pronounced for non-economic damages. With such damages, “‘there is no

clear line of demarcation between punishment and compensation and a verdict for

a specified amount frequently includes elements of both.’” State Farm, 538 U.S. at

426 (quoting Restatement (Second) of Torts § 908, cmt. c (1979)); see also, e.g.,

Turley v. ISG Lackawanna, Inc., 774 F.3d 140, 165-66 (2d Cir. 2014) (Ratio of 4:1

“serves neither predictability nor proportionality … particularly … where the

underlying compensation is, as it is in this case, for intangible—and therefore

immeasurable—emotional damages. Imposing extensive punitive damages on top

of such an award stacks one attempt to monetize highly offensive behavior, which

effort is necessarily to some extent visceral, upon another.”).

Accordingly, courts have held that “when the compensatory damages are

substantial or already contain a punitive element, lesser ratios ‘can reach the

outermost limit of the due process guarantee.’” Simon, 113 P.3d at 77 (emphasis

added); see also, e.g., Walker v. Farmers Ins. Exch., 63 Cal. Rptr. 3d 507, 513 (Ct.

App. 2007) (affirming reduction of punitive damages to 1:1 ratio because award of


23

emotional distress damages added “a punitive element to respondents’ recovery of

compensatory damages”).

In sum, in this case, where the conduct barely crosses the line that allows the

imposition of punitive liability (if it does cross that line) and the plaintiff already

has received a very sizeable compensatory award that undoubtedly contains a

significant punitive element in the form of emotional-distress damages, a ratio of

1:1 should be considered the outer limit and the live question should be whether an

even lower ratio is called for.


24

CONCLUSION

Assuming that the Court does not reverse on one of the grounds raised by

the defendants, the punitive damages should be reduced to, at most, $2,700,000

and allocated between the two defendants in proportion to the punitive damage

awards originally imposed by the jury.

Dated: April 16, 2015

Of Counsel:

Kate Comerford ToddWarren PostmanU.S. CHAMBER LITIGATION CENTER

1615 H Street, N.W.Washington, D.C. 20062(202) 463-5337

Respectfully submitted.

s/Evan M. TagerEvan M. TagerCarl J. SummersMAYER BROWN LLP1999 K Street, N.W.Washington, DC 20006(202) 263-3000

Attorneys for Amicus Curiae theChamber of Commerce of theUnited States of America


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CERTIFICATE OF COMPLIANCEWITH TYPEFACE AND WORD-COUNT LIMITATIONS

I hereby certify that the attached brief is proportionally spaced, has a

typeface of 14 points, and contains 6,729 words, including those in the table

attached as Exhibit 1.

s/Carl J. SummersCarl J. Summers


CERTIFICATE OF SERVICE

I hereby certify that on this 16th day of April, 2015, I electronically filed the

foregoing with the Clerk of the Court for the United States Court of Appeals for

the Tenth Circuit by using the appellate CM/ECF system. I further certify that all

participants in the case are registered CM/ECF users, who will be served by the

appellate CM/ECF system.



CM/ECF CERTIFICATES

I hereby certify that no privacy redactions were required or made in the

attached brief. I further certify that the hard copies submitted to the Court are exact

copies of the electronic copy filed using the CM/ECF system. I further certify that

the electronic copy of this brief was scanned by System Center Endpoint

Protection (version 1.1.11502.0, updated April 16, 2015) and, according to the

program, is free of viruses.



in the united states court of appeals for the tenth … · no. 14-8082 in the united states court...

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